BY ALEX THOMPSON

Hello, Readers !!!! A couple of issues ago I wrote an article on Costa Rican corporations (Sociedades Anónimas). For some of you, who have dealt with corporations, some from the beginning and some acquired one existent, this article shall teach you on corporate modifications and / or Board of Directors changes.

• Each corporation has to legalize a set of books. In the case of a “S.A.”, the corporate books are divided by: Three legal books (Acts for Shareholders Assembly; Acts for Board of Directors & Shareholders Registry) and three Accounting Books (Diary, Major & Inventory and Balances).

• An existing corporation, commercially active or not, has a determined number of clauses or bylaws, that estipulate the normal function of the entity. These bylaws are determined at the constitution of the corporation and they verse from administrative subjects to representative powers, capital stock and shares, etc.

• The shareholders, as owners of the capital stock of the company are entitled, through a voting procedure, to modify these clauses, as long as the changes do not contravene the law. Any modification of the clauses or a new change or appointment to the Board of Directors has to be duly written in the Legal Books of the corporation.

• The process, mentioned above, reflected in the Legal Books is called an “Assembly of Shareholders’ Act”, signed unanimous by the shareholders, or at least the majority of them with voting rights (this case involves a special voting system in the Assembly).

• The “Assembly of Shareholders” book has to be presented before a Notary Public and the correspondent Act registered in the Public Registry, as an entry in the corporation’s records.

• This professional is in charge of the impression of the text in his Protocolo (Notary’s Entry Book) and the follow up process to register the new entry in the National Public Registry. That’s why the Legal Corporate Books are so important, because without them, the Notary Public cannot proceed with registration of the modifications, due to “Public Faith”, he/she has to witness the Assembly of Shareholders, represented in the Act, and keep a copy of it.

• Costa Rican Law establishes that corporate bylaws’ changes or nominees for the Board of Directors are operative after registration in the National Public Registry. This means that even if you have appeared before a Notary Public for the registration of the changes, if the document is not registered, your Power is not valid in our legal system.

• Is always a good advice to yearly review the status of your corporation, from the registration point of view, as well as, patrimony and taxes implications. For example, if you have performed corporate modifications or nominees for the Board of Directors in the past, is always healthy to review that these changes were actually registered by the professional in charge. Usually these studies are not very expensive but will give you peace of mind when you really expect to operate with your Sociedad Anónima.

Last, but not least, consult with your Attorney to review what type of modifications can be performed in a SA and the process involved, and previous to any work establish the rules of payment and time frame for registration. At your service.